Can we deduct property taxes credited at closing?

[markntx]

We purchased a home in August.  We were credited with approximately 8/12's of the year's property taxes at closing, but paid 100% of the property taxes for the year on December 31.  I'm assuming that we can only deduct the net (4/12's) that we paid, even though we paid the tax district the entire bill.  Is this correct?

[MichaelL1]

You are correct.

Property taxes are often in arrears, so the seller had to pay to get caught up, and then you get the property tax deduction for what you paid, less the credit at closing. Good job.

[AndrewQQ]

In my case, I both sold and bought property mid year.  Both of my mortgages have a 1098 Box 10 sent to me both my old and new mortgage holders.  Turbotax has imported both, and I have a figure that is the sum of both on Schedule A for Property Taxes paid.  I lived in each place roughly 50% of 2019.

But in the closing, I have both credits and debits to and from the seller/buyer for property taxes (since we're on both sides of the transactions since we sold and bought.)  Do I need to figure out the NET of these closing debits and credits and then OVERRIDE TurboTax's Schedule A value that was simply from the two 1098s? 

Or does everything come out in the wash and only need to use the 1098 Sum?  TIA.

[KarenJ2]

The correct answer is that you should only use the property tax amount that you actually ended up paying in 2019.  

Can I claim property (real estate) taxes if I recently bought or sold my home?

[AndrewQQ]

So I tske that the answer is "yes", you do use the tax credits/debits in both closings in concert with the 1098 amounts to come up with what you actually paid, whether that was on paper at the closings with the credits to buyer/seller and from the escrow amounts paid out (which is only what the 1098 reflects ). It's the total net amount that counts.

[Opus 17]

---

@AndrewQQ wrote:

So I tske that the answer is "yes", you do use the tax credits/debits in both closings in concert with the 1098 amounts to come up with what you actually paid, whether that was on paper at the closings with the credits to buyer/seller and from the escrow amounts paid out (which is only what the 1098 reflects ). It's the total net amount that counts.

---

You need to determine each transaction separately.   This can be complicated because you might pay taxes in advance, or in arrears, or on different dates.  For example, in New York, the county tax bill is due Feb 15 for the period 1/1 through 12/31, and the school tax bill is generally due 9/15 for the period 7/1-6/30.  In Illinois (I think) taxes are billed on 1/1 for the previous year. 

The operative principle is you only can deduct taxes for periods time you owned the home.

For the sale; suppose you paid a full year on 1/15/19 and closed on 5/30 and the buyer gives you a credit.  You reduce the amount of tax you report by the amount of the credit.

For the purchase, suppose you bought on 6/15 and paid the seller a credit toward the rest of the year.  that counts as a deduction as if you had paid it directly to the town or county.  Then you paid the 2020 tax bill on December 20, 2019.  You would claim both the bill you paid and the credit to the seller, as if you had paid both to the town or county.

This does not require an "override" (which has a specific meaning in Turbotax).  Simply report the true amount of tax you paid to the taxing authority (or seller) if it is different than the amount on the 1098.

[AndrewQQ]

Great! That's exactly what I thought. thank you both for your replies.